Quote:
Originally Posted by GGG
There are several economic papers that suggests that variable rate mortgages are lower cost in real dollars over time. So the question becomes a) do you believe you are smarter than the bond markets or can you afford the downside risk.
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Is is true that variable is generally a better deal. However, because something generally works doesn't mean it should be applied to all situations. I don't think it's a matter of thinking your "smarter" than bond markets.
For example, in 2021, when the banks were giving fixed rates for 5 years below 2% fixed, and the government was also pumping cash into the market, which was likely to spur inflation, it wasn't arrogant to realize that looking at fixed, and for as long as possible, should be an option.
There's also a huge advantage to certainty and the ability to plan around that certainty. For example, if I know that my mortgage is going to be X amount, I have a much better idea of what my disposable income is, and I may be better able to take advantage of other investment opportunities.